Supreme Court tie lets states face lawsuits in other states

A tie vote at the Supreme Court means California officials can be hauled into a Nevada state court to face allegations in a long-running tax dispute with a Nevada inventor.

But on a separate issue in the case, the justices ruled 6 to 2 that Nevada can’t award damages greater than what California or Nevada law would allow. The court threw out a $1 million judgment awarded to Gilbert Hyatt over allegations that California’s tax agency invaded his privacy and committed fraud.

It was the third time the court has deadlocked 4 to 4 since the death of Justice Antonin Scalia in February.

Hyatt is a former California resident who says he moved to Las Vegas in 1991, just before collecting $40 million in patent fees for developing a computer microprocessor chip.

California officials say that he moved out of the state in 1992 and that he is on the hook for millions in back taxes.

But Hyatt sued the agency, claiming that its officials were overzealous while pursuing him. He won a $500 million judgment that was later reduced to $1 million.

California officials had asked the justices to overturn a 1979 ruling that said one state can open the doors of its courts to a private citizen’s lawsuit against another state. Lawyers representing California argued that such lawsuits violate the sovereign protections of states.

Writing for the high court, Justice Stephen Breyer said the court was divided on the issue, leaving the current law intact.

But Breyer said Nevada courts could not allow greater damages than what California or Nevada would ordinarily permit in such cases. California law would allow no damages in such lawsuits, while Nevada law limits damages to $50,000.

Breyer said the Nevada court allowed damages to exceed $50,000 in this case under “a special and discriminatory legal rule that would apply only to sister states.” The court said that was unconstitutional.

The case now returns to lower courts to be resolved.

Hyatt accused the tax agency of outrageous behavior: sending officials to peer through his windows, contacting estranged family members and sharing his personal information with business associates.

It was the second time the dispute has ended up before the Supreme Court. The justices ruled in 2003 that California’s Franchise Tax Board was not immune from a lawsuit in Nevada courts, even though California law would prevent the agency from being sued in California.

Chief Justice John G. Roberts Jr. dissented, saying the Constitution does not block a state from applying its own law to address an injury within its own borders. He was joined by Justice Clarence Thomas.

Also Tuesday, a unanimous Supreme Court ruled that Maryland officials overstepped their authority when they offered financial subsidies to encourage construction of a power plant in the state.

The justices said the Maryland plan interferes with federal law governing wholesale electricity rates.

The ruling is a setback for Maryland and other states that want to ensure a reliable supply of electricity for customers at reasonable rates.

The case involves a 2012 decision by state regulators to order construction of a natural-gas power plant. Officials offered the winning bidder a financial incentive by requiring utilities to buy electricity from the plant for 20 years at a fixed price.

Lower courts sided with rival power suppliers who said the incentive interfered with pricing in wholesale markets, which are subject to federal regulation.

Writing for the high court, Justice Ruth Bader Ginsburg acknowledged that states have authority to encourage development of in-state power plants. But she said that Maryland’s program “impermissibly intruded on the wholesale electricity market.” She said the power to set wholesale electricity prices lies exclusively with the Federal Energy Regulatory Commission.

Ginsburg noted that the court was not preventing states from taking other measures to encourage development of new or more environmentally friendly power plants. Those could include tax incentives, land grants, direct subsidies or other actions that don’t intrude on federal authority, she said.






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